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Buying into investment trusts can be a tricky business with shares swinging between discounts and premiums and some trusts issuing multiple share classes.

But an ability to see past low sentiment and market swings, driving down share price and widening discounts, can help you pick out some bargains. Peter Walls, fund manager at Unicorn, is constantly on the lookout for discounted quality investment trusts for the Mastertrust portfolio, and says a discount doesn’t always mean a trust is a bad buy.

Walls says: ‘People like to buy things that have already come up and sell things that have gone down which creates discount volatility. It gives me the opportunity to review my positions and forces me to be a contrarian.

‘The link between strong recent performance and discount narrowing tend to encourage me to look to top slice or realise investments where the asset value has been performing well, the discount has narrowed in and recycle that in to more deeply discounted opportunities.’

Investing in Europe

The Mastertrust’s top holdings rack up a few of the areas and sectors investors have been keen to avoid with problems in the eurozone and market volatility. Trusts focusing on Japan, private equity and small companies all feature in the fund's top ten.

‘If I believe in the quality of the fund manager and I think if I can add a bit of spice at the margins of these things it gives me a little more edge and the chance of outperforming but I’m not one to bet the ranch,’ said Walls (pictured).

‘I’m not generally inclined to buy well-known trusts like Foreign & Colonial investment trust and Alliance . I think there’s a lot of wealth managers and individuals, if they like investment trusts they can do that for themselves so I’m trying to get a bit more specialisation funds in the portfolio and really investing for the long term.

Walls explains: ‘In both cases these funds are exposed to core Europe rather than the periphery and because of all the travails and problems that we’ve had equity markets have been a tough place to be for a considerable time.’

‘Alexander Darwall at Jupiter, is someone with a really strong but long-term record with a high conviction to what he does. The manager has clearly aligned his interests with shareholders with about £15 million of his own money invested.

Caelainn, Thanks for reporting this. Peter Walls usually knows what he is talking about. In my opinion, his views are far more valuable than some well known over-rated retail fund group manager just pumping up his (often underperforming) fund.

We do not necessarily agree in the short-term with all his choices, but his job is to follow the sector and spot value and performance so always interesting to hear what he looking at, buying and thinking about.

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